Mumbai: The BSE benchmark Sensex on Tuesday plunged the most in five weeks, shedding 353 points on selling of bank and interest-sensitive stocks as markets reacted to the RBI's decision to raise interest rates by 50 basis points.

Heavy losses by engineering giant L&T, country's leading banks SBI, ICICI Bank and HDFC, along with Sensex leader Reliance Industries contributed the most to the fall in the BSE's bellwether index.

The Bombay Stock Exchange's 30-share index, which had started on an upbeat note, tumbled within few minutes of the Reserve Bank of India announcing a 50 basis points hike in interest rates, well above the market expectations.

The aggressive stance by the central bank to arrest a towering inflation pushed the 30-share Sensex down by 353.07 points at 18,518.22, a level last witnessed on June 20. All its sectoral indices closed in negative zone.

Brokers said markets were expecting a 25 basis points hike and had factored that in the last few sessions. They said investors, spooked by hike in interest rates by 50 basis points, sold interest-rare sensitive stocks.

Sensex has lost 9.4 per cent in the year so far as high inflation and hardening of rates continues to dent the corporate earnings and outlook.

Broad-based National Stock Exchange index Nifty fell by 105.45 points to 5,574.85 after rising to 5,702.25 intra-days.

(Agencies)